Winning the War Against Fraud: How Businesses and Individuals Can Outsmart Fraudsters

Fraud is becoming more pervasive than in previous years, and both businesses and individuals are facing record-breaking losses. According to the Federal Trade Commission, small businesses experienced a higher frequency of fraud in 2023, with an average loss rate of 5% of their annual revenues. Consumer fraud losses also surged by 14%, exceeding $10 billion. These alarming statistics underscore the substantial financial and operational impacts of fraud. By understanding the various types of fraud and their effects, businesses can develop and implement robust prevention strategies to mitigate these risks. 

That is why this month (August 2024) we’re starting “Fraud Fighters”, a Herbein Conversation podcast series available for download on Apple and Spotify. This series will provide business leaders and individuals with essential knowledge on current and emerging fraud trends and, most importantly, the tools to mitigate risk of loss. 

Each episode will cover the most common fraud impacting businesses, including:

• Check & Payment Fraud - Manipulating checks or payment processes to divert funds. According to the Federal Trade Commission, nearly 31% of small businesses reported check fraud in 2023 with 65% of those instances incurring a loss of greater than $50,000.

• Payroll Fraud - Employees manipulate the payroll system to receive unearned compensation. According to ACFE statistics, about 27% of businesses experience payroll fraud, with it being 50% more common in small businesses.

• Business Email Compromise (BEC) - Scammers use email to impersonate company executives or vendors to trick employees into transferring funds or revealing sensitive information. Businesses reported $2.95 billion of fraud losses due to BEC in 2023.

• Asset Misappropriation - This involves the theft or misuse of a company's assets, such as cash, inventory, or equipment. In 2023, this type of fraud accounted for approximately $1.5 billion of reported business fraud cases.

• Phishing - Fraudsters send emails or messages that appear to be from legitimate sources to trick employees into providing sensitive information. This can lead to unauthorized access to company accounts and data breaches.

We’ll also discuss the most common fraud impacting individuals including:

• Imposter Scams - Fraudsters pretend to be someone you trust, such as a government official, family member, or company representative, to steal your money or personal information. According to the Federal Trade Commission, consumers lost over $2.7 billion to imposter scams in 2023.

• Tech Support Scams - Fraudsters pose as tech support representatives to gain access to your computer and steal personal information or install malware. $1.3 billion in losses were sustained due to Tech Support scams in 2023.

• Telephone & Mobile Services Fraud - Fraudsters use phone calls or text messages to trick individuals into providing personal information or making payments. In 2023, $38.95 billion was lost to telecommunications fraud, which represents a 12% increase over 2022.

• Identify Theft – Using Phishing and other techniques, thieves steal personal information to commit fraud, such as opening new accounts or making unauthorized purchases.

Fraud is a serious issue that can have far-reaching impacts on both businesses and individuals. It can financially and reputationally cripple a business, while also causing devastating financial and emotional harm to individuals.

Be sure to tune in to Fraud Fighters to learn top ways to combat fraud and contact our risk management professionals with any specific questions. Together, we can win the fight against fraud!

Article contributed by Debbi Fetter.